SEC Rules to Require Lawyers to Report Misconduct

Washington (Aug. 14, 2002) -- In conjunction with the passage of the Sarbanes-Oxley Act of 2002, the Securities and Exchange Commission is gearing up to unveil rules that would require corporate lawyers to report evidence of misconduct to their respective boards.

"Lawyers for public companies represent the company as a whole and its shareholder-owners, not the managers who hire and fire them," SEC chairman Harvey Pitt told attendees in an address before the American Bar Association.

The accounting reform bill also mandates that the regulatory agency establish guidelines that require a company lawyer to report any instance of wrongdoing to the chief executive or to the chief counsel, respectively. If their responses are deemed inadequate, the lawyers are required to report their concerns to the board or the company’s audit committee.

Pitt also said the SEC would seek to recover legal fees paid by corporations if lawyers are found to have conspired to protect any corporate malfeasance.

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